This sovereign rating is issued by The
Economist Intelligence Unit credit rating agency, registered in accordance with
Regulation (EC) No 1060/2009 of 16 September 2009, on credit rating agencies, as
amended, and is issued pursuant to such regulation.

The underlying sovereign risk rating score improves but the rating itself remains unchanged at BB—thanks largely to a recovery in global oil prices and a consequent sharp increase in hydrocarbons export revenue and a strengthening of the emirate's external position. The fiscal deficit is also narrowing, because of an increase in oil and gas revenue, although runaway spending on subsidies and wages will remain a constraint on the rating.

Currency risk

The currency risk rating has strengthened from B to BB as boycott-induced capital outflows have largely subsided and the peg to the US dollar is supported by recovering foreign reserves and a return to a current-account surplus. Moreover, reserves at the Qatar Investment Authority (QIA, the sovereign wealth fund) are sufficient to maintain the currency peg to the US dollar for several years, meaning that the risk of devaluation remains negligible at present.

Banking sector risk

The banking sector risk rating has improved from B to BB on the back of greater riyal stability and a recovery in central bank reserves, which will safeguard hard-currency liquidity in local banks. In addition, liquidity injections from the QIA and access to international capital markets (albeit at rising premiums) will keep domestic lenders solvent in 2018-19.

Political risk

Qatar remains in the grip of a tightly enforced diplomatic and economic boycott by four Arab states—Saudi Arabia, the UAE, Bahrain and Egypt. The rating is therefore constrained by external pressure on the regime, as well as by the government's intolerance of domestic political expression. Although fiscal policy flexibility has weakened, commitment by the sovereign to its debt obligations will not waiver under such political pressures.

Economic structure risk

A high level of dependence on oil and gas earnings will remain a source of structural weakness. Efforts to promote economic diversification will be derailed by the boycott and the consequent cuts to capital spending.